Fractional ownership is a type of shared property ownership where multiple individuals have rights to use the property, and each owner holds a certain percentage or “fraction” of the asset.
In this investment strategy, the ownership is legally divided into shares or fractions, which can be purchased by investors. The proportion of the property that each investor owns is typically equivalent to the share of the total purchase price they paid. Each owner has the right to use the property for a specified period each year, usually commensurate with their ownership stake.
Fractional ownership is often used for high-value properties like vacation or resort properties, allowing owners to enjoy the benefits of these types of properties without having to finance and maintain the entire property on their own.
This approach can make owning a second home or investment property more affordable and manageable, but it also requires a structured agreement to govern the use, maintenance, and potential sale of the property. In addition, fractional ownership arrangements often involve an annual maintenance fee that each owner must pay to cover the cost of maintaining the property.
It’s worth noting that fractional ownership is different from timeshares. While both strategies allow multiple parties to share the use and cost of a property, timeshares only provide the right to use the property for a specific time each year and do not involve actual ownership of a fraction of the property.